Orbis Gold shareholders should be scratching their heads in disbelief at the deal directors have struck with Canadian-listed SEMAFO

John Robertson

PortfolioDirect

Orbis Gold shareholders should be scratching their heads in disbelief at the deal directors have struck with Canadian-listed SEMAFO. In October 2014, SEMAFO foreshadowed a bid for the shares of ASX-listed Orbis Gold at a price equivalent to US$143 million. Directors advised shareholders to refuse such a low price. The principal asset of Orbis is the Natougou gold deposit in Burkina Faso which the company has valued at US$533 million. On Wednesday, the same directors recommended a new deal pricing the company at US$137 million. That's US$5 million less! Due to currency fluctuations, the Australian dollar share price is 9.7% higher but Australian gold sector equity prices have risen 29%. Putting aside the dubious negotiating skills of the Orbis directors, there is a more general issue illustrated by these events. Natougou was never worth $533 million. This amount was another example of an exaggerated valuation, usually using highly favourable and unrealistically low discount rates, being used as bait for investors.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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